Charting the latest unemployment report

By Kurt Brouwer

The latest report from the Bureau of Labor Statistics is a bit better than expected. Rather than having you pour over a lot of words and numbers, I decided to post charts on jobs and unemployment so you could see for yourself where we stand. Before we go into the charts, here is a quick summary.

Unemployment rate at 9.4% (down from 9.8%)

103,000 payroll jobs were gained

October & November jobs were revised upward

Now, let’s go to the charts.

Recessions & payroll job loses

The first chart shows the percent of job losses for all recessions since World War II, with 1948 being the first and 2007 being the current one. The quick takeaway from this is that, in the past, recessions had one of two trends. Either they were steep on the way down and on the way back up in terms of job losses (see 1948 – blue line). Or, they were shallow on the way down and back up (see 2001 – brown line).

Unfortunately, in this recession we have managed to combine the worst of both worlds — a steep loss of jobs with a very gradual bottoming out and little or no recovery (see 2007 – red line).

As business conditions improve, these folks will begin working full-time, but that won’t be considered a new job. In other words, there is a lot of slack in the system and employers almost certainly will just give these folks more hours before they hire a new employee.

This chart shows the number of Americans who have been unemployed for over 26 years weeks (probably feels like years though).

Having this many people unemployed for such a long time is bad news. I believe companies are finding ways to grow without as many employees and that means it will be tougher and tougher for long-term unemployed folks to find a new job.

What’s next?

We are seeing some progress on unemployment, but not much. In my view, the going will be slow and elevated levels of unemployment are going to be with us for years. There are some signs of economic life rebounding. Manufacturing statistics are pretty good and the number of job openings is perking up. However, when things do improve, businesses will most likely bring their part-timers up to full-time as a first step. This won’t count as a new job though. Finally, as conditions improve, more workers who are not even looking for work will begin looking and thus will begin being counted as unemployed. Right now, millions of Americans are not looking for work and thus they are not counted as being unemployed.

We will get through this, but I’m afraid it is going to take years, not months.

About Fundmastery Blog

Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.